Reflections and observations on the expatriate experience from an American scientist living and working in the Netherlands.

Friday, June 18, 2010

Making the pitch; raising the funds

On the pitch, Barrington

Both of my businesses are in full fundraising mode, making this one of the most exhilarating and frustrating times in my experience. On the one hand, I’m able to stand in front of accomplished, insightful people and talk with them about my ideas and how to make them real. On the other hand, I’m there to ask for their money, one at a time, face to face.

I have two propositions up for consideration, one early-stage, one late-stage; one asking 200 thousand dollars, the other asking 3 million dollars. My expectation at the outset was that it would take longer and require more effort to raise more money.

The reality is more like this:

In general, the time to complete the process is independent of the amount raised: it will take six months. It’s probably a function of diligence and paperwork, but there are no quick raises.

It’s better to ask for lots of money than a little: not only will it last longer, but also that the system is geared towards larger amounts because of the fixed overhead associated with any investment.

Investors specialize, targeting local economies connected to communities, groups, and universities. Unless the proposition meets the profile, it will be excluded before it is considered.

Angels and seed funds give $50,000-$100,000, so asking for $200,000 means that several need to come on board at once. There has to be a lead investor before the others will follow (corollary to the old saying “The First Million is the Hardest”)

It’s almost impossible to ask for an amount between 1 million and 10 million: it’s too much for angels and too little for VCs. Counter-intuitively, it’s better to scale up the proposition to 10 million.

Raising money is a very personal transaction: you have to spend the time, bend with the wind, look people in the eye, and sell the vision. It’s a hard discussion and an emotional decision on both sides.

It’s not fair. It just isn’t: so be ready to pick up after each ‘NO” and hop back up on stage for the next pitch as though it were the first.